The Commissioner Of Income Tax Tamil Nadu I, Madras v. The Presidency Club 51, Ethiraj Salai Chennai 600 008

In the High Court of Judicature at Madras The Honourable Mr.Justice K.RAVIRAJA PANDIANandThe Honourable Mr.Justice P.P.S.JANARTHANA RAJA The Commissioner of Income TaxTamil Nadu I, Madras. .. Appellant /AppellantVs. The Presidency Club51, Ethiraj SalaiChennai 600 008.. Respondent /Respondent TAX CASE (APPEAL) filed under Section 260A of the Income TaxAct against the order of the Income Tax Appellate Tribunal Madras 'C'Bench dated 16.11.2007 in I.T.A.No.2253/Mds/2006 for the assessmentyear 2003-2004 and against the order of the Commissioner of IncomeTax (Appeals) in ITA No.559/05-06 dated 7.8.06 and against the orderof the Asst. Commissioner of Income Tax Company Circle III(2)Chennai-34, in P.A. No/GIR.No. AABCT10001G, dated 6.1.06. For Appellant : Mrs.Pushya SitaramanJUDGMENT This appeal is filed by the revenue against the order ofthe Income Tax Appellate Tribunal Madras 'C' Bench dated 16.11.2007in I.T.A.No.2253/Mds/2006 for the assessment year 2003-2004 byformulating the following substantial question of law:- "Whether on the facts and in thecircumstances of the case, the AppellateTribunal was right in law in holding that, a sumof Rs.1,21,72,000/- non refundable entrance feeand Rs.4,30,000/- collected from its new memberis not taxable, even though the above feescollected by the assessee being a revenuereceipt?" https://hcservices.ecourts.gov.in/hcservices/ 2. The material facts culled out from the statement of facts inthe memorandum of grounds go as follows:- The assessee is a Recreation Club. The assessee companyfiled its return of income for the assessment year 2003-2004 on26.09.2004 showing total loss of Rs.58,49,698/-,which was processedunder Section 143(1)(a) of the Act on 15.11.2004. The case wasselected for scrutiny and notice under Section 143(2)/142(1) wasissued. The Assessing Officer treated the non refundable entrancefee of Rs.1,21,72,000/- and Rs.4,30,000/- collected from his newMembers as revenue receipts. Aggrieved bythe order of the assessingofficer, the assessee filed an appeal before the Commissioner ofIncome Tax (Appeals), who by his order dated 07.08.2006 held infavour of the assessee by holding that the assessing officer has notbrought on record any evidence to prove that the assessee hasviolated any principle of mutuality. The Commissioner of Income Tax(Appeals) further held that even if it is presumed that the entrancefee are revenue in nature, even then, the excess over expenditureclub will not be taxable under the Act as long as they have notviolated the principle of mutuality, following the decision in thecase of Commissioner of Income Tax vs. Bankipur Club Ltd., reportedin 226 ITR 97. The revenue filed an appeal against the order passedby the Commissioner of Income Tax (Appeals) to the Income TaxAppellate Tribunal and the Tribunal dismissed the appeal and decidedthe appeal in favour of the assessee following the decision reportedin 226 ITR 97. The correctness of the said the order of the Income-tax Appellate Tribunal is challenged by the appellant in thisappeal. 3. Learned counsel appearing for the revenue has submitted thatthe issue involved in this appeal is covered by the judgement of theSupreme Court in the case of Commissioner of Income Tax vs. BankipurClub Ltd., reported in 226 ITR 97. 4. The Commissioner of Income Tax (Appeals) as well as theultimate fact finding authority have come to the conclusion that theassessee club has not violated the guidelines prescribed for themutual concerns and the revenue has not brought on record anyevidence to establish that the assessee has violated the prnciples ofmutuality. 5. In the case of Commissioner of Income Tax vs. Bankipur ClubLtd., reported in 226 ITR 97 , the Supreme Court has held as follows:- 3. Learned counsel appearing for the revenue has submitted thatthe issue involved in this appeal is covered by the judgement of theSupreme Court in the case of Commissioner of Income Tax vs. BankipurClub Ltd., reported in 226 ITR 97. 4. The Commissioner of Income Tax (Appeals) as well as theultimate fact finding authority have come to the conclusion that theassessee club has not violated the guidelines prescribed for themutual concerns and the revenue has not brought on record anyevidence to establish that the assessee has violated the prnciples ofmutuality. 5. In the case of Commissioner of Income Tax vs. Bankipur ClubLtd., reported in 226 ITR 97 , the Supreme Court has held as follows:- "In the light of the findings of fact thereceipts for the various facilities extended bythe clubs to its members, as part of the usual https://hcservices.ecourts.gov.in/hcservices/ privileges, advantages and conveniences, attachedto the membership of the club, could not be saidto be "a trading activity". The surplus-excess ofreceipts over the expenditure as a result ofmutual arrangement, could not be said to be'income' for the purpose of the Act". 6. In the light of the above decision, the appeal is dismissed. Sd/-Asst. Registrar/true copy/Sub Asst. RegistrarrgTo1)The Asst. Registrar of Income Tax, Appellate Tribunal, RajajiBhavan, II Floor, Besant Nagar, Madras-902.The Secretary, Central Board of Revenue, New Delhi.3.The Assistant Registrar, Income-Tax Appellate Tribunal, III 'C'Bench, Madras.4.The Commissioner of Income Tax (Appeals)-III, Chennai5.The Asst. Commissioner of Income Tax Company Circle III(2),Chennai-34. +1 cc to Mrs.Pushya Sitaraman, Senior Standing Counsel for IT, SR.No.38928 Tax Case (A)No.493 of 2008SGL (CO)SMK/31.7.08